Holiday retail outlook 2025: American consumers expected to spend $1 trillion despite economic concerns

Most New Yorkers are planning to shop for the holidays despite concerns over tariffs and inflation — but many plan to turn to plastic to cover their expenses, according to recent consumer surveys.

The National Retail Federation estimated earlier this month that American consumers will spend between $1.01 trillion and $1.02 trillion this holiday season, an increase from last year’s $976.1 billion.

According to the trade group’s annual consumer survey, the average shopper plans to spend $890.49 on holiday gifts, food, decorations and other seasonal goods — the second highest amount the 23-year-old survey has ever recorded. The number falls slightly below last year’s record of $901.99.

Locally, newly-released data from TD Bank shows that 72% of shoppers in New York and northern New Jersey plan to use credit cards for their holiday shopping, with 49% expecting to carry a balance past the holidays.

Nearly a quarter of respondents in the region said they reduced retirement contributions to manage holiday costs, compared to 16% of respondents nationally, data showed. Most said they hold a rewards card and 51% plan to use cash back rewards.

Nationally, 87% of shoppers said they want to avoid overspending and 79% planned to seek discounts to stretch their holiday budgets, the report said.

Marc Womack, head of consumer deposit and payment products at TD Bank, in an email highlighted a focus among consumers on more strategic spending.

In New York and northern New Jersey, 44% of survey respondents said they planned to use generative AI to make holiday budgets and, nationally, Gen Z and Millennials in particular expressed caution about holiday spending, with plans to strategically use Black Friday sales, he said. 

“This year we’re seeing that consumers are planning earlier, saving consistently and approaching the season with a greater sense of financial control,” said Womack.

A seasonal trend

More than 40% of shoppers in the latest Consumer Pulse study from TransUnion also named credit cards as their preferred payment method for the upcoming holiday season, an increase from 38% last year. That comes with an anticipated increase in holiday spending by many Americans, more than half of whom say they expect to spend the same or more in 2025 compared to 2024.

High-income consumers “are using credit cards as a transaction vehicle” to maximize value by earning the rewards offered by many cards, while lower-income consumers are aiming for the flexibility of paying down their balance over a period of time, said Charlie Wise, head of global research and consulting at the credit reporting agency.

These habits fit seasonal trends, he said. “Consumers build credit card balances in the third and fourth quarter through back-to-school shopping, holiday shopping, and then in the first quarter, they pay them down. It’s almost like a heart beat.”

Buy Now, Pay Later services may also play a role for many holiday shoppers this year, according to a recent survey from legal services company LegalShield that found 46% of Americans plan to spend more than usual during the holiday season.

LegalShield provider attorney Rebecca Carter warned that consumers should be aware that BNPL debt will start factoring into FICO scores by the end of the year.

“What I’m telling consumers as we go into the holidays is just to be organized,” she said. “Don’t rely on your email inbox” to track BNPL payments.

Colleen Kirk, a marketing professor at New York Institute of Technology, said that one reason people may be turning towards credit cards and BNPL this holiday season is because it defers the pain of paying.

“It allows us to borrow from our future selves,” she said.

Earning rewards points adds to the perception that paying with credit cards doesn’t cost as much, she said.

She added that many people engage in spending when they feel threatened, whether it’s from economic anxiety or other stressors.

“We shop to feel good about ourselves. That can translate to gift giving too,” she said.

Sue Hoeffner, owner of Sea Creations in Port Jefferson, said she doesn’t plan to do much shopping on Black Friday. She’s already done much of her holiday shopping, plus many companies have already been promoting sales.

Besides, she said, she loves “to stand on a long line one or two days before Christmas. It just gets me in the spirit. Even if I don’t need a particular gift for somebody, I’m going to find something and stand on that long line. Isn’t that crazy? But it’s fun.”

By Brianne Ledda

brianne.ledda@newsday.com@brianne_ledda

Brianne Ledda covers personal finance and affordability for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.